Will Help to Buy mortgage plan mean another housing bubble?

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The Government's new 'Help to Buy' scheme, which is intended to permit UK housebuyers to arrange home loans of 95%, is to be unveiled 3 months sooner than expected.

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Speaking before the start of the Tory Party conference in Manchester, the Prime Minister David Cameron made light of worries that the Help to Buy initiative will overheat the market and contribute to a new 'housing bubble'.

Help for 1st-time buyers


Questioned by broadcaster Andrew Marr on BBC1, Mr Cameron said assistance should be provided to 1st-time buyers and that the housing market was "recovering from a very low base". He added that he would not stand aside as people's aims to join the housing ladder were "being trashed".

The scheme operates by granting a government equity loan over the property to assist people who are unable to raise a sufficient deposit, with most mortgage products being limited to a maximum 90% loan to value.

Cabinet disagreements over Help to Buy


Some observers, among them Mr Cameron's cabinet colleague Vincent Cable, have suggested Help to Buy will lead to a house-price boom that cannot be sustained, especially in the south-east.

Mr Cameron dismissed these fears, however. "If we don't do this it will only be people with rich parents to help them who can get on the housing ladder," the Prime Minister said. "That is not fair, it is not right."

Mr Cameron was speaking against a background of union protests in Manchester against government austerity measures. He asked people to have faith in the Bank of England, whose remit in watching the potential effects on house prices of Help to Buy has been extended.

Not all lenders signed up


He noted that large lenders such as NatWest, RBS and the Halifax are already signatories to the scheme. However other big banks, such as Barclays, HSBC, Nationwide and Santander, are as yet undecided.

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